It has been a typically quiet year-end week, without a lot of significant news for markets or of notable activity. U.S. markets have had a very strong run since the beginning of October, and as we often observe, a correction is possible at any time.
Still, as we noted above and in our previously published year-ahead outlook, the landscape for investors remains positive. In our view, any significant correction will represent a buying opportunity, particularly in our favored long-term themes: the cloud, big data, cybersecurity, genomics and other disruptive medical technology, and defense electronics and cyberwarfare.
While the U.S. has been “the place to be” for a long time, we see cogent reasons for modest portfolio allocations elsewhere:
- To the U.K., which we believe will benefit from Brexit and the removal of Brexit uncertainty — even if that uncertainty spikes again due to the prospect of a “no deal” exit;
- To Europe, which may be able to catch up a little of its valuation lag with more accommodative fiscal policies under the EU’s new president;
- To India, which remains probably the best major growth story in emerging markets thanks to the difficult reforms being undertaken by the Modi administration;
- And to Japan, where increasing productivity, improvements to corporate governance, and the policy dividends of Abenomics may also allow a laggard market an opportunity to catch up somewhat.
With all that said, we still favor the U.S. among global stock markets.
We note that on a global scale, the threat of terrorist activity seems to be rising; we would not be surprised to see a major terrorist incident during the year. A major event could contribute to a market correction, which would be a buying opportunity.
As we have commented recently, while the inflation landscape and a lack of financial fears do not lend themselves to rapid gold appreciation, we see reasons for gold to appreciate towards $1,600 over the course of 2020.
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Thanks for listening.
